Question

Catherine has recently reviewed a number of indicators of financial control. The one that troubled her indicated that the company could have trouble meeting its short-term financial obligations. Which of the following was she concerned about?

a. Liquidity
b. Solvency
c. Profitability
d. Efficiency

Answer 1

Catherine is concerned about liquidity, which is the ease of converting assets into cash to meet short-term obligations.

Step-by-step explanation:

Catherine is concerned about the indicator of financial control that shows the company could have trouble meeting its short-term financial obligations.

This is related to liquidity, which refers to how quickly a financial asset can be converted to cash or used to purchase goods or services.

Cash is considered very liquid, while other assets may take longer to convert, hence, are less liquid.

Difficulty in meeting short-term obligations indicates a potential liquidity problem, as the company may not have readily accessible funds to cover those obligations.